Structuring Participation Agreements in Commercial Finance: Lender Due Diligence
Strategies for Lead Lenders and Participants to Minimize and Manage Risk; FDIC Guidance
Recording of a 90-minute premium CLE video webinar with Q&A
This CLE course will examine current trends in the loan participation market, critical provisions of participation agreements, and best practices in due diligence for participating lenders. The panel will also discuss FDIC regulatory guidance regarding risk management for purchased loans and purchased loan participations.
- Overview of loan participations
- Market trends
- What is a "participating interest"?
- What are the essential characteristics?
- High priority participation agreement provisions and how they differ from syndications
- Lender voting rights
- Defaulting lenders
- Borrower workouts, foreclosures
- Seller reps and warranties
- Reclaiming or buying back transferred participation
- Circumstances where loan participation is a "true sale" of the underlying loan
- Situations in which a participated loan may be subject to another's security interest
- Automatic perfection
- Settlement conventions/implications of delayed settlement; how loan sellers may obtain settlement liquidity coverage
- Due diligence by the participating lender
- Understanding and reducing the selling counterparty risks
- Considering the participation structure and lender rights risks
- How much do you review the borrower group deal and how much do you rely on representations?
- FDIC FIL492015
- Understanding the advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations
- Workouts in participations: What is the effect on and effect of participant rights?
The panel will review the issues that arise from these concerns, among other critical questions:
- What are the crucial points to address in a loan participation agreement?
- What are the lessons from recent litigation regarding loan participation agreements?
- When will loan participation be regarded as a "true sale" of the underlying loan, and why does it matter?
- What specific information should participants or purchasers obtain from the lead lender or seller before entering into the transaction, and what other diligence is essential?
- What guidance does the FDIC provide banks in performing due diligence to minimize risks of participations from alternative non-bank lenders?
Dr. Alison R. Manzer
Cassels Brock & Blackwell
Ms. Manzer is a member of the Firm's Financial Services Group. Her practice encompasses a broad range of commercial... | Read More
Ms. Manzer is a member of the Firm's Financial Services Group. Her practice encompasses a broad range of commercial practice in the financial services sector, including financial institution regulation, corporate and commercial lending, asset-based financing, securitization and structured finance, private equity, project finance, asset finance and leasing, business reorganization, syndicated lending and related areas. A significant part of her practice involves multi-jurisdiction transactions where she has expertise in the structuring requirements of financing, investment and securitization transactions to solve taxation, conflicts of laws, document structure, currency and rate issues, among others.Close
James C. Schulwolf
Shipman & Goodwin
Mr. Schulwolf represents senior and mezzanine lenders, venture capital investors (including SBIC’s), private... | Read More
Mr. Schulwolf represents senior and mezzanine lenders, venture capital investors (including SBIC’s), private equity funds, hedge funds, emerging growth companies and private companies in financing, investment, leasing, acquisition, corporate, licensing and restructuring transactions. He regularly advises these clients with respect to structuring, negotiating, and closing complex transactions.Close
Jeffrey A. Wurst
Mr. Wurst has more than 30 years of experience and is well recognized for handling significant commercial finance and... | Read More
Mr. Wurst has more than 30 years of experience and is well recognized for handling significant commercial finance and bankruptcy matters. He is an esteemed fellow of the American College of Commercial Finance Lawyers and is a panelist on the American Arbitration Association’s National Roster of Arbitrators. Mr. Wurst has significant expertise in asset-based lending, factoring, and all other areas of commercial finance, bankruptcy matters, workouts and turnaround situations. He is actively involved in the documentation of commercial finance and leasing transactions, as well as litigation that may arise out of or in connection with such transactions.Close